MSTC IPO kicks off: Should you subscribe?

The company is engaged in e-commerce, trading and recycling.

The financial performance of the company is not encouraging, said Choice Broking.

NEW DLEHI: Mini Ratna MSTC on Wednesday hit the market with an initial public offering. The government has proposed to offload 1.76 crore shares, or 25 per cent, of total paid-up equity in the largest B2B e-commerce company in India. The issue by the Kolkata-headquartered firm will be closed on March 15.

Here are key things you must know before considering the IPO:

Business backgroundThe company is engaged in three major activities – e-commerce, trading and recycling. Trading is a major segment that accounts for 80-85 per cent of total revenues of the firm. The e-commerce vertical accounts for 3-7 per cent sales.

The company offers e-auction/e-sale, e-procurement services and development of customised software. It partners with different government agencies and ministries to conduct e-auctions and offers comprehensive range of services in e-procurement segment.

In the trading segment, the company sources industrial raw materials like low-ash metallurgical coke, HR coil, naptha, crude oil, coking coal, steam coal and line pipes for its clients across steel, oil and gas, power sectors.

Besides, the company is looking to set up an auto shredding plant in India via MMRPL for recycling ELVs and other white goods by converting these into shredded scrap, a vital raw material for steel plants.

FinancialsThe financial performance of the company is not encouraging, said Choice Broking. “Despite reporting increased transactions across the marketing and e-commerce segments, it reported a 16.2 per cent CAGR decline in top line over FY16-18, which was mainly due to sharp decline the sales of thermal coal. Reported Ebitda was at loss for the majority of the time period,” the brokerage said.

Revenues for the first half of FY19 came in at Rs 1,491.55 crore. For FY18, FY17 and FY16, sales stood at Rs 2,793.15 crore and Rs 1,876.2 crore and Rs 3307.80 crore, respectively. Revenue for the trading vertical stood at Rs 1,207.52 crore for the six months ended September 30; e-commerce vertical sales stood at Rs 104.57 crore.

No listed peerThere are no listed companies of the company in India, which are engaged in the same line of business.

Strengths

One of the leading PSU entities engaged in providing e-commerce services to customers in a most transparent, fair and secured manner

Ability to create a virtual marketplace for any physical commercial activity thereby creating value for all the stakeholders.

ValuationsAt the upper end of the price band of Rs 121-128 per, the issue size is Rs 226 crore. With the issue, the government is looking to pare 1.76 crore shares or 25 per cent stake in a bid to meet its divestment target for the year. MSTC will offer a Rs 5.5 per share discount on the allotment price to retail investors.

“At the higher end of the price band, the company is demanding a P/S valuation of 0.4 times to its FY18 sales. Based on FY19E and FY20E sales, the issue is demanding a P/S valuation of 0.3 times. Considering the importance and positioning of its services among various government entities, favourable government policies for business growth, stable dividend payout and improvement in the financial performance, the issue seems to be attractively priced,” said Choice Broking.

MSTC IPO: Everything you need to know

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The curtain goes up...

12 Mar, 2019

E-commerce player MSTC's initial public offer kicks off on Wednesday. Its shares are proposed to be listed on the BSE and the NSE.
There are other nuggets of information about the offer. We filter out the details for you.

​ IPO by numbers

12 Mar, 2019

Date: March 13-15 (Wednesday to Friday)
Price: Rs 121–128 per share with face value of Rs 10 each
How much on offer: Up to 17,670,400 shares
Bid lot: Minimum is 90 and in multiples of 90 thereafter

​ Any discount?

12 Mar, 2019

Yes. A discount equivalent to Rs 5.50 per share on the offer price is available for retail individual bidders and eligible employee bidders.
The IPO constitutes 25.10 per cent of the post offer paid-up equity capital of the company.

The buck stops with the govt

12 Mar, 2019

All proceeds will go to the selling shareholder, the President of India acting through the Ministry of Steel.
Equirus Capital Private is the Book Running Lead Manager.

Know more about MSTC

12 Mar, 2019

MSTC is one of the leading PSU entities that provides e-commerce services to customers. It has done some pioneering work catering to the government's requirements, partnering with different agencies and ministries in conducting e-auctions, according to a D&B report.

Its three main business verticals are e-commerce, trading, and recycling.

With over 1,90,000 auctions serving over 1,10,000 users as of December 31, 2018, the company is the preferred service provider for various governments and government controlled entities. The trading firm has conducted 28,600 auctions/events during 2017-18 and 30,500 auctions/event for nine months ended December 31, 2018.